accountant

INDEX NO. 652838/2012
FILED: NEW YORK COUNTY CLERK 04/03/2014
NYSCEF DOC. NO. 327
RECEIVED NYSCEF: 04/03/2014
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
AYSE GIRAY, individually and on behalf of
EUPHRATES, INC.,
Plaintiff,
Index No. 652838/2012
Part 39
Hon. Saliann Scarpulla, J.S.C.
HAMDI ULUKAYA, EUPHRATES, INC and
CHOBANI, INC.,
Mot. Seq. No. 13
Defendants.
DEFENDANTS' MEMORANDUM IN OPPOSITION TO
PLAINTIFF'S APPLICATION FOR A TEMPORARY RESTRAINING ORDER
CONTAINS CONFIDENTIAL INFORMATION
PURSUANT TO PROTECTIVE ORDER
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT
1
FACTS
3
A.
Nature of the Case
3
B.
Plaintiff Ayse Giray alida "Sara Baran"
6
C.
The Contemplated Transaction
8
9
ARGUMENT
I.
PLAINTIFF IS NOT LIKELY TO SUCCEED ON THE MERITS
Plaintiff is Bereft of Evidence Supporting Her Fundamental Factual
Contentions.
10
B.
Relevant Indicia Show that Plaintiff is Not a Shareholder.
12
C.
Plaintiff s Claim to Shareholder Status in Chobani as Derivative of Her
Purported Status as a Euphrates Shareholder is Time-Barred.
15
D.
Equity Precludes Plaintiff from Now Claiming to be a Shareholder. .
17
E.
Plaintiff s Claim is Barred by a Judgment of Divorce
A.
II.
9
PLAINTIFF WILL NOT SUFFER IRREPARABLE INJURY IF INJUNCTIVE
RELIEF IS DENIED
.20
21
III. THE BALANCE OF EQUITIES FAVORS DEFENDANTS
22
IV. PLAINTIFF WILL BE UNABLE TO PROVIDE AN APPROPRIATE
UNDERTAKING
24
CONCLUSION
25
TABLE OF AUTHORITIES
Page(s)
Cases
Amarant v. D 'Antonio,
197 A.D.2d 432 (1st Dep't 1993)
17, 19
Boronow v. Boronow,
71 N.Y.2d 284 (1988)
20
Chen v. Fischer,
6 N.Y.3d 94 (2005)
20
Deane v. City of New York Dep't of Bldgs.,
177 Misc. 2d 687 (Sup. Ct. 1998)
23, 24
Destiny USA Holdings, LLC v. Citigroup Global Markets Realty Corp.,
69 A.D.3d 212 (4th Dep't 2009)
25
Drews v. Eastern Sausage & Provision Co.,
125 F.Supp. 289 (S.D.N.Y. 1954)
16
Envt 'l Concern v. Larchwood Constr.,
101 A.D.2d 591 (2d Dep't 1984)
18
Ferolito v. Vultaggio,
36 Misc.3d 1227(A) (Sup. Ct. 2012)
23
Festinger v. Edrich, 8 Misc.3d 700 (Sup. Ct. Kings County 2005),
aff'd 32 A.D.3d 412 (2d Dep't 2006)
19
Fischer v. Deitsch,
168 A.D.2d 599 (2d Dep't 1990)
9, 24
Gerstner v. Katz,
38 A.D.3d 835 (2d Dep't 2007)
25
Gluck v. Hoary,
55 A.D.3d 668 (2d Dep't 2008)
9
Goldman v. Rio,
19 Misc.3d 384 (Sup. Ct. Nassau Co. 2008),
aff'd on other grounds 62 A.D.3d (2d Dept. 2009)
Hunt v. Hunt,
222 A.D.2d 759 (3d Dep't 1995)
18
13, 15
Idlewild 94-100 Clark, LLC v. City of New York,
898 N.Y.S.2d 808 (N.Y. Sup. Ct. 2010)
21
Kun v. Fulop,
71 A.D.3d 832 (2d Dep't 2010)
13, 15
11
TABLE OF AUTHORITIES (CONT'D)
Page(s)
Levy v. Braverman,
24 A.D.2d 430 (1st Dep't 1965)
18
Matter of Skorr v. Skorr Steel Co., Inc.,
29 A.D.3d 594 (2d Dep't 2006)
16
Mohamed v. Persaud,
35 Misc. 3d 1219(A) (N.Y. Sup. Ct. 2012)
22
Nobu Next Door, LLC v. Fine Arts Hous., Inc.,
4 N.Y.3d 839 (2005)
9
O'Connell v. Corcoran,
1 N.Y.3d 179 (2003)
20
Scott v. City of Buffalo,
16 Misc. 3d 259 (Sup. Ct. 2006), affd, 38 A.D.3d 1287( 4th Dep't 2007)
24
Scotto v. Mei,
219 A.D.2d 181 (1st Dep't 1996)
25
Shokin v. Geller,
16 Misc. 3d 1110(A) (Sup. Ct. 2007)
23
Sithe Energies, Inc. v. 335 Madison Ave., LLC,
45 A.D.3d 469 (1st Dep't 2007)
Turner v. American Metal Co.,
268 A.D. 239 (1st Dep't 1944)
Welwart v. Dataware Elecs. Corp.,
277 A.D.2d 372 (2d Dep't 2000)
9
16, 17
17
Rules
C.P.L.R. § 213(7)
C.P.L.R. § 6312(b)
C.P.L.R. § 6313
New York Domestic Relations Law §236[13]
17, 18
26
9
.20
PRELIMINARY STATEMENT
More than a year after filing this case, and without yet having established that she is a
shareholder of Defendant Chobani, Inc. ("Chobani"), Plaintiff seeks to invoke the equitable
jurisdiction of the Court to enjoin a transaction which, even if she were a shareholder, would not
require her approval and from whose consummation she can articulate no harm, never mind
irreparable hann. As a threshold matter, for Plaintiff to prevail on her motion—which seeks to
prevent Defendant Hamdi Ulukaya from selling any shares of his stock in Chobani and to
provide her with a "seat at the table" to protect "interests" which she does not have—she must
first demonstrate by clear and convincing evidence that she is likely to succeed on the merits of
her claim that she is a shareholder of Chobani. Plaintiff s theory of ownership requires the Court
to disregard the facts, assume bald assertions that have not been proven, and venture down a
rabbit hole with Plaintiff: Plaintiff contends that she is a shareholder of Chobani because (1) she
asserts (but has not proven) that she is a shareholder of Euphrates, Inc. ("Euphrates")—a separate
company—and (2) she asserts (but has not proven) that Chobani was a corporate opportunity that
rightfully belonged to Euphrates. The critical weakness of Plaintiff s asserted standing to seek
relief is highlighted further by the fact that the issue of corporate opportunity, the theory upon
which Plaintiff claims her status as a shareholder of Chobani, is not even presently before the
Court under the bifurcation order; it is an issue to be taken up in the next phase of the litigation,
only in the event that she can prove that she is a shareholder of Euphrates. In any event the
statute of limitations ran on any corporate opportunity claim over a year before she brought suit.
In the nineteen months since Plaintiff filed this lawsuit, Plaintiff has not once tried to
challenge the manner in which Chobani has conducted its business and operations. Indeed, over
six months ago, Plaintiff voluntarily bargained away any supposed right to move for advance
notice of any corporate transactions in which Chobani planned to engage. All the while, and
since this case was filed, Chobani has undertaken numerous initiatives. It has launched and
marketed new product lines, invested in new advertising campaigns, and negotiated and
consummated financing transactions to fund its operations and expansion. Only now,
does Plaintiff object.
Ultimately, Plaintiff's brief makes clear that her motion is based not on the purported
merits of her lawsuit, but on a laundry list of alleged bad acts that she claims Mr. Ulukaya has
engaged in over the years—none of which is remotely relevant here. Because Plaintiff cannot
win on the merits of her claims, she has fabricated any number of fantastical and completely
baseless allegations. Although Plaintiff alleges that her own fabrications and these accusations
tilt the balance of equities in her favor, her understanding of the law is seriously misguided. As
the Court well knows, balancing the equities requires the Court to weigh the harm each side will
suffer in the absence or face of injunctive relief. It is not a license to attack the character of
one's adversary, let alone to do so by making baseless charges.
Unsurprisingly then, Plaintiff s motion suffers from numerous, independent failures each
of which taken alone would preclude the requested relief, but which, considered collectively,
demonstrate the absurdity of her motion. First, Plaintiff cannot meet her burden of proving by
clear and convincing evidence that she is likely to succeed on the merits of her claim that she is a
shareholder of Chobani. Setting aside the fact that no discovery has occurred on the issue of
corporate opportunity, and the fact that Plaintiff lacks any of the traditional indicia of equity
ownership (such as stock certificates or being listed on a stock ledger), Plaintiff s own
affirmative actions to date demonstrate that she never was a shareholder of Chobani and that
. Second, Plaintiff cannot establish that she will be irreparably and
2
immediately harmed absent obtaining an injunction; indeed, she can establish no harm at all.
Moreover, even if there was some harm that Plaintiff could articulate, she has made no showing
that money damages would not be an adequate remedy for whatever harm she might theorize.
Third, the balance of the equities sharply favors Chobani. Whereas Plaintiff cannot demonstrate
any harm—much less any irreparable harm—that would befall her absent injunctive relief, if an
injunction does issue and the transaction being contemplated does not go forward,
Fourth,
there is no way that Plaintiff could ever post a bond sufficient to indemnify
Chobani for the losses it would incur. For all these reasons, discussed in further detail below,
Plaintiff's motion should be denied in its entirety.
FACTS
A.
Nature of the Case
Hamdi Ulukaya is a successful entrepreneur who founded Chobani (a company that
produces Greek Yogurt) and Euphrates, a separate company that produces feta cheese. In 1994,
Mr. Ulukaya came to this country from Turkey and, in 1997, met and later married Plaintiff
Around that same time in 1997, Mr. Ulukaya and his brother began making plans to start
Euphrates. Mr. Ulukaya also discussed with Plaintiff the possibility of her becoming a partial
owner of Euphrates. In fact, an early draft of a business plan contemplated Plaintiff becoming a
one-third owner. Plaintiff's involvement as an owner, however, was conditioned upon her
contributing start-up funds and complying with the various requirements imposed by financial
institutions providing loans to Euphrates, including signing a personal varantee—requirements
with which Mr. Ulukaya and his brother complied. Plaintiff did not, however, come through
with any money, was not willing to sign a personal guarantee for a lease and bank loan to
3
Euphrates, and did not become an owner of Euphrates. The fact that the sole shareholders of
Euphrates are Mr. Ulukaya and his brother is reflected in executed loan documents, personal
guarantees, and the stock certificates of Euphrates, all of which have been produced to Plaintiff
Plaintiff and Mr. Ulukaya divorced in 1999.
The seminal event in the startup of Euphrates was the closing of a $1,200,000 business
loan from NBT Bank in 2001 (guaranteed by the USDA) that allowed Euphrates to buy cheesemaking equipment to make feta cheese. Among other conditions, NBT Bank required the
owners of Euphrates to sign personal guarantees. (Exhibit 1, Conditional Commitment.)
Plaintiff did not sign a guarantee and is not mentioned at all in the loan documents. (Id.) Lowell
Gibson, a former Program Director with the USDA, and Ed Tomeck, a Senior Vice-President at
NBT both participated in the origination of the loan. Neither recalls Plaintiff s involvement in
the loan application process, and both have sworn that if Plaintiff were a part-owner of Euphrates
at the time, she would have been required to sign a personal guarantee for the loan. (Exhibit 2,
Affidavit of Lowell J. Gibson at Tff 12-13, Exhibit 3, Affidavit of Edward Tomeck at TT 12-13.).
As Mr. Tomeck states, "no such personal guarantee" was provided. (Exhibit 3. Affidavit of
Edward Tomeck at ¶ 13.)
In 2002, almost a year after the NBT loan closing, Euphrates began making cheese, but
business was slower than anticipated, and Mr. Ulukaya was soon looking at a range of options.
Plaintiff s family agreed to lend money to Mr. Ulukaya personally, and ultimately loaned him
approximately $185,000. Mr. Ulukaya repaid the loans made by Plaintiff s family with generous
interest; by 2006, Mr. Ulukaya had returned approximately twice that amount.
Separately, in 2003, Plaintiff approached Mr. Ulukaya with a renewed interest in
becoming an investor in Euphrates, this time saying that she wanted a letter that she could show
4
Turkish banking contacts to try to raise capital there.' Following that conversation, Mr. Ulukaya
provided Plaintiff with certain documents that explained the circumstances under which she
could become an owner of the company. (To her complaint in these proceedings, Plaintiff
attached as Exhibit B a one page hand-written letter from Mr. Ulukaya, which was one of these
documents.) Nothing came of Plaintiff s intent, and again, Plaintiff did not invest any monies in
Euphrates.
At the end of 2004, Mr. Ulukaya formed a second company, initially called Agro-Farma,
to make Greek Yogurt. Agro-Farma later changed its name to Chobani. Chobani is a very
different company from Euphrates. Whereas Euphrates makes feta cheese, Chobani makes
Greek Yogurt. Euphrates typically markets its product to food-service companies; Chobani
typically markets its product to the public. The two companies operate in different facilities and
use different equipment (because yogurt is made from different equipment than cheese), and they
secured their financing from different sources. As Mr. Ulukaya's success grew, Plaintiff
repeatedly initiated contact with him on seemingly friendly terms and requested money for
various reasons. After Mr. Ulukaya refused to accede to her requests for money, Plaintiff filed a
lawsuit alleging ownership in his companies.
With the Court's encouragement, the parties agreed to bifurcate the issues to be decided
in these proceedings. In Phase I, the Court will first determine whether Plaintiff is a shareholder
of either Euphrates or Chobani. (Exhibit 4, January 3, 2013, Stipulated Order.) The parties are
currently conducting discovery on this issue.
Plaintiff's brief asserts that Mr. Ulukaya contended in his deposition that he provided Plaintiff this letter so that
she could use it to defraud Turkish banks. (Plaintiff's Brief at 5.) Contrary to Plaintiff s bald assertion, Mr.
Ulukaya's testimony says nothing to suggest that either of them would use it to defraud lenders.
5
B.
Plaintiff Ayse Giray a/k/a "Sara Baran"
Defendants deposed Plaintiff for two days on May 23 and 24, 2013,
, Plaintiff
uses two different identities, complete with different names
; public records show
judgments entered against "Ayse Giray" dating back to 1998.
; see e.g. Exhibit 6, Compendium of Default Judgments entered against Ayse
Giray.) In contrast, "Sara Baran," appears to own assets hidden from Ayse Giray's creditors. At
her deposition,
Even though there is no dispute that she lacks stock certificates or any other conventional
indicia of share ownership in both Chobani and Euphrates; yet Plaintiff still contends that she is a
shareholder of both companies. As to Euphrates, Plaintiff contends that she became a one-third
owner by allegedly investing approximately $198,000 in 1997 to 1999. (Exhibit 7, Compl.
in 16-
17.) As to Chobani, Plaintiff contends that she became an owner because Chobani was a
wrongfully-diverted corporate opportunity of Euphrates. Plaintiff asserts that she has understood
herself to be a shareholder of Euphrates since 1997 and a shareholder of Chobani since 2007.
(Exhibit 7, Compl.
IN 9, 10, 14, 20, 21, 26, 42, 43, 44.)
2
Whatever Plaintiff s motivation, the fact remains that she has continued to use both names and identities
throughout the last 15 years and has made no attempt to refrain from using her "Ayse Giray" identity in publicly
available materials—the most obvious example being this lawsuit.
6
Overwhelming documentary evidence and the testimony of disinterested third parties
refute Plaintiff s contention that she is a shareholder. For example, Plaintiff s own attorney and
accountant, Harry Binder, testified that while Plaintiff claimed to have "invested, loaned,
whatever" money in "a cheese factory," she was unable to provide him with credible
documentation regarding any purported loan or investment, and that Plaintiff "couldn't even
really explain the transaction." (Exhibit 8, H. Binder Dep. Tr. at 118:16-124:13.) ("[W]hatever
she did, it was just ridiculous.") Another third party witness, Mustafa Coskun, who provided a
loan to Mr. Ulukaya, testified that as of 2000—well after Plaintiff alleges she made her initial
investment—ownership of Euphrates was split between Mr. Ulukaya and his brother. (Exhibit 9,
M. Coskun Dep. Tr. at 32:21-33:25.) This is confirmed by numerous corporate records.
In addition, there
are no documents showing that Plaintiff actually transferred $198,000 to Mr. Ulukaya.
Moreover, Plaintiff s story is belied by her own conduct. Over the many years in which
she has claimed to understand herself to be a shareholder in Euphrates and Chobani, Plaintiff has
repeatedly denied owning an interest in either company—sometimes under oath. For example,
Likewise, •
3
7
C.
The Contemplated Transaction
8
ARGUMENT
Preliminary injunctive relief is a "drastic remedy which should be used sparingly."
Fischer v. Deitsch, 168 A.D.2d 599, 601 (2d Dep't 1990). To prevail on an application for
injunctive relief, the movant must establish each of the following three elements by clear and
convincing evidence: (1) "immediate and irreparable" injury without the preliminary injunction;
(2) a likelihood of ultimate success on the merits; and (3) that the balance of equities weighs in
the movant's favor. C.P.L.R. 6301; see Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d
839, 840 (2005) (reversing trial court's grant of preliminary injunction where equity did not
favor movant); Gluck v. Hoary, 55 A.D.3d 668, 668 (2d Dep't 2008) (burden on preliminary
injunction is "clear and convincing"). Moreover, because the relief Plaintiff seeks in this motion
is essentially the ultimate relief she seeks in her underlying lawsuit—namely, a voice in the
affairs of the Mr. Ulukaya's companies—she must make a heightened showing of "imperative,
urgent, or grave necessity." Sithe Energies, Inc. v. 335 Madison Ave., LLC, 45 A.D.3d 469, 470
(1st Dep't 2007) (reversing "preliminary injunction [that] improperly gives plaintiffs the ultimate
equitable relief sought in the action"). And because Plaintiff is also seeking a temporary
restraining order, she additionally must show that "loss or damages will result unless the
defendant is restrained before a hearing [on the preliminary injunction] can be had." C.P.L.R.
6313. Plaintiff cannot meet these standards and her motion should be denied in its entirety.
I.
PLAINTIFF IS NOT LIKELY TO SUCCEED ON THE MERITS
Plaintiff s motion for a preliminary injunction fails at the outset because she cannot show,
by the clear and convincing evidence required, a likelihood of success on the merits of her claims
in this lawsuit.
Gluck, 55 A.D.3d at 668 (affirming denial of preliminary injunction where
plaintiff failed to establish likelihood of success by clear and convincing evidence). Indeed, not
only does Plaintiff fall far short of her burden but, in fact, her claim to shareholder status in
9
Chobani is unlikely to succeed for multiple, independent reasons. First, Plaintiff has failed to
put forth clear and convincing evidence supporting the factual allegations in her complaint that
form the basis for her claim.
Second, the indicia that do exist and that are relevant to the
question of share ownership overwhelmingly point to the conclusion that plaintiff is not a
shareholder of either Euphrates or Chobani. Third, any claim that Plaintiff is a shareholder in
Chobani by virtue of her purported derivative claim for usurpation of a corporate opportunity is
time-barred. Fourth, equity precludes the Court from recognizing Plaintiff as a shareholder.
Fifth, Plaintiff s claim is barred by her judgment of divorce with Mr. Ulukaya.
A.
Plaintiff is Bereft of Evidence Supporting Her Fundamental Factual
Contentions.
Plaintiff s claim that she is likely to succeed on the merits is belied, as an initial matter,
by Plaintiff s inability to substantiate the fundamental allegations set forth in her verified
amended complaint. Plaintiff alleges that she is a shareholder in Chobani because she allegedly
provided start-up funds to Euphrates as a capital investment, and that because Chobani allegedly
was a diverted corporate opportunity of Euphrates, she is entitled to the same ownership
percentage in Chobani as she claims to hold in Euphrates. 4 No discovery at all has taken place
on this issue, so Plaintiff cannot establish a likelihood of success on this allegation.
But even if Chobani were a corporate opportunity of Euphrates, Plaintiff would need to
establish that she is a shareholder of Euphrates in order for it to mean anything with respect to
her. There is no evidence that Plaintiff ever became a shareholder of Euphrates by, as she
contends, providing start-up funds to Euphrates. Plaintiff contends that she "invested" $198,000
in the period of 1997 to 1999, that a further approximately $200,000 was "invested" in 2002 by
4
Plaintiff previously claimed that there was some sort of oral agreement by which she separately obtained an
ownership interest in Chobani. Plaintiff appears to have abandoned that claim by failing to present it in her
moving papers.
10
her family, and that she loaned Mr. Ulukaya $100,000 in 2003. There are no documents that
evidence the actual transfer and receipt of monies between Plaintiff and Mr. Ulukaya or
Euphrates in the timeframes that Plaintiff claims to have "invested" (or at any other time). For
example, there is not a single document showing that, between 1997 and 1999, Plaintiff
transferred and Mr. Ulukaya (or Euphrates) received $198,000 in start-up funds. 5 Similarly, there
is not a single document showing that, in 2003, Plaintiff transferred and Mr. Ulukaya (or
Euphrates) received $100,000. In fact, Plaintiff has not produced any direct evidence that she
even had $198,000 at her disposal between 1997 and 1999. Indeed, Defendants' investigation of
public records reveals that, starting in 1997, Plaintiff defaulted on several material financial
obligations and, by 1998, her creditors had secured judgments against her for approximately
$74,000—which seriously calls into question whether Plaintiff had the ability to fund a purported
$198,000 investment she now claims to have made in Euphrates. 6 What the documents do show
5
Plaintiff makes reference to a check dated March 12, 1998, in the amount of $7000, that she allegedly invested
in Euphrates. As Plaintiff herself practically concedes, this check was deposited twice, and twice returned for
insufficient funds the deposit slip provides no evidence to the contrary. Similarly, there is no direct evidence
that any proceeds from Plaintiff s sale of real estate was invested in Euphrates. Further, as Mr. Ulukaya
testified,
But even accepting Plaintiff s argument, any cheese imported in this period involved a different and
separate company called Euphrates Importing.
Nor does Exhibit 19 to Plaintiff s brief evidence any investment of money in Euphrates. As Mr. Ulukaya
testified,
6
Plaintiff's brief says that she sold properties she owned and used the proceeds to fund the startup of Euphrates.
The deed stamps on the recorded documents reflect that the price paid for Unit 2H was $302,000 and it was
subject to a $283,500 mortgage to National Standard Mortgage Corp. The price paid for Unit 2J was $74,000,
and the property had a mortgage to Citibank against it in the amount of $74,000. It appears from the recordings
11
is that Plaintiff s family lent Mr. Ulukaya approximately $185,000 in 2002 and 2003, and that
Mr. Ulukaya repaid them approximately twice as much. 7 While Plaintiff has characterizes these
payments as further equity investments, Plaintiff s family is not claiming any equity interest in
Euphrates or Chobani.
In response, Plaintiff can only point to a few documents that, in reality, turn out to
corroborate Defendants' version of the facts—not Plaintiff s. Mr. Ulukaya's handwritten letter
of September 22, 2003 was provided when Plaintiff, for a second time, expressed an interest in
becoming an investor in Euphrates but, for a second time, she failed to come through with any
money. 8 Likewise, the draft business plan dated October 1997 was completed years before
Euphrates obtained any financing or commenced operations. As Mr. Ulukaya testified,
Importantly, however, the documents to which Plaintiff repeatedly points all pertain to
Euphrates, not Chobani.
B.
Relevant indicia show that Plaintiff is not a shareholder.
It is not disputed that Plaintiff does not now have, nor was she ever issued, a stock
certificate from either Euphrates or Chobani. (Exhibit 16, Plaintiff s Responses to Defendants
Requests for Admission.) While a fact-finder may consider other indicia, if any, bearing on the
in the Clerk's Office that Plaintiff might have received $30,000 net of mortgage payoffs, closing costs, and
realtor commissions, assuming that all proceeds were not used to remove judgment creditors' liens on the
property.
7
Documents associated with repayments to Plaintiff's family reflect that Mr. Ulukaya was repaying a loan.
e.g. Exhibit 15, Check from H. Ulukaya to M. Giray.)
8
12
(See
issue to determine whether, even in the absence of stock certificates, a litigant is a shareholder in
a company, all of the indicia here show that Plaintiff is not a shareholder.
See Kun v. Fulop, 71
A.D.3d 832, 834 (2d Dep't 2010) (plaintiff failed to establish shareholder status where "the
evidence showed that [plaintiff] never asked for or received any forms to report a shareholder's
distributed share of income from [the company], corporate tax forms, or any other indicia of
shareholder status").
Plaintiff s own lawyer and accountant testified that Plaintiff "couldn't even really explain
the transaction" by which she now claims to have become a shareholder. (Exhibit 8, H. Binder
Dep. Tr. at 118:16-124:13.) And in fact, Plaintiff has categorically denied being a shareholder
many times. For example, despite the fact that Plaintiff claims to have become a shareholder of
Euphrates in 1997,
Not only is this directly at odds with her current story that by 1997 she understood
herself to be a shareholder of Euphrates, but it is sufficient evidence by itself for the Court to
determine that Plaintiff is not a shareholder of Euphrates. In Hunt v. Hunt, the Third Department
rejected a similar claim by a plaintiff who, while lacking a stock certificate, claimed to be a
shareholder in a closely-held company. 222 A.D.2d 759 (3d Dep't 1995). There, despite the fact
that the plaintiff was listed as a shareholder on the corporation's tax returns for seven years and
was listed in a number of corporate documents as a principal of the business, the Third
Department held that the plaintiff failed to meet his burden of establishing that he was a
shareholder where he had disclaimed such ownership in, among other things, financial
statements submitted to the Family Court and to a bank. Id. at 761 ("It is significant that Donald
admitted on a number of occasions that he had no ownership in the corporation. In 1974 he
13
testified at a Family Court proceeding that he was not a shareholder in the business.") Plaintiff s
claim here is weaker than that of the plaintiff in Hunt.
Plaintiff had no involvement with
Euphrates (and certainly none with Chobani) since its inception:
While Plaintiff argues that she is referred to as a 33% shareholder in a Euphrates business
plan drafted by Mr. Ulukaya in the fall of 1997—just as the idea for Euphrates was taking form
and more than three years before Euphrates closed a $1.2 million startup loan from NBT
Bank9 —this draft document further undercuts any assertion by Plaintiff that she is a shareholder
of Euphrates (and certainly provides no support for the contention that she is a shareholder of
Chobani). As Mr. Ulukaya explained in his deposition testimony,
10 However, Plaintiff never
came through with the funds necessary to purchase this ownership interest and none of the
documents in the years thereafter include any reference to Plaintiff or any indication that she
owned any portion—let alone one-third—of Euphrates. This is
particularly important given the fact that, between 1997 and 2001, Euphrates was applying to
9
At this same time in the fall of 1997, the Ulukaya brothers submitted a proposal to the Fulton County Industrial
Development Agency. As did the preliminary business plan, it reflected Plaintiff as a proposed 1/3 shareholder.
FCIDA did not approve the proposal, and efforts to finance the proposed business continued over the ensuing
years until NBT and USDA went forward in February 2001. In fact, an early document submitted to the USDA
described the potential shareholders as Mr. Ulukaya, his brother, and a gentleman named Jeff Ward. What the
documents demonstrate is that, in the early years of the company, there were many unknowns.
o
Many things in draft business plan upon which Plaintiff relies did not come to pass as described. The product
mix it proposed became strictly feta cheese. Euphrates concentrated on selling product in regional markets, not
international ones. Equipment to manufacture the cheese came from a different supplier. Mr. Ulukaya's
brother became an 8% shareholder instead of 33% as reflected in the business plan. The plan described in the
fall of 1997 to FCEDC and to FCIDA differed considerably from what was financed and started in February
2001.
14
various banks and government institutions for small business loans needed to finance startup
costs. These banks required anyone who was going to be a stockholder in Euphrates, and thus
Mr. Ulukaya and his brother (who owns 8% of Euphrates), to sign personal guarantees for the
moneys being advanced. It is undisputed that Plaintiff never provided such a guarantee. As Ed
Tomeck of NBT Bank (the bank which provided a $1.2 million loan to Euphrates in 2001)
explained in an affidavit, there is no way that NBT Bank would have approved a loan to
Euphrates unless it had personal guarantees from each of its owners. (Exhibit 2, Affidavit of
Lowell J. Gibson at ¶1112-13, Exhibit 3, Affidavit of Edward Tomeck at ¶J 12-13.)
As in Kun and Hunt, Plaintiff has stated multiple other times, sometimes under penalty of
perjury, that she does not own stock in either business, including in documents
By way of example,
Similarly, after she filed suit, Plaintiff
C.
Plaintiff's Claim to Shareholder Status in Chobani as Derivative of Her
Purported Status as a Euphrates Shareholder is Time-Barred.
Plaintiff claims that she is a shareholder of Chobani because Chobani was a wrongfullydiverted corporate opportunity of Euphrates, she (as a purported Euphrates shareholder) should
have an ownership interest in Chobani equal to the ownership interest she claims to hold in
Euphrates. Putting aside the multiple substantive infirmities with this argument, including (as
explained above) Plaintiff s inability to establish that she is a shareholder of Euphrates, this
15
argument fails for the simple reason that any claim by Euphrates (or by Plaintiff derivatively as a
purported shareholder of Euphrates) is time-barred.
A claim for usurpation of a corporate opportunity is governed by a six-year statute of
limitations. See C.P.L.R. 213(7); Turner v. Am. Metal Co., 268 A.D. 239, 266 (1st Dep't 1944)
(statute of limitations against individual accrued at the latest when corporation formed to exploit
alleged corporate opportunity issued shares); Matter of Skorr v. Skorr Steel Co., Inc., 29 A.D.3d
594, 594 (2d Dep't 2006) (where plaintiff alleged usurpation of corporate opportunity to acquire
real property with loan from corporation, statute of limitations would run from purchase of
property). Here, Plaintiff s corporate usurpation claim accrued, and the statutory period to bring
a claim for usurpation began to run, when Chobani (f/k/a "Agro-Farma") was incorporated as a
standalone company created for the purpose of producing and distributing yogurt in December
2004, or, at the very latest, on August 6, 2005, when Agro-Farma closed a transaction to
purchase a defunct Kraft Foods plant in upstate New York that would house Chobani's
operations. See Turner, 268 A.D. 239 at 266 (statute of limitations against individual accrued at
the latest when corporation formed to exploit alleged corporate opportunity issued shares);
Drews v. E. Sausage & Provision Co., 125 F.Supp. 289, 292 (S.D.N.Y. 1954) (where the
purchase of certain property for the purpose of starting up new venture is the alleged usurpation,
the statute of limitations begins to accrue on the date the property was purchased). Counting
from the later of these dates, Plaintiff's complaint, which was filed on August 14, 2012, was filed
over a year too late. n
Nor can there be any merit to a contention by Plaintiff that her cause of action for
11
The purchase of the Kraft plant in upstate New York by Agro-Farma was a matter of public record, and thus
any contention now by Plaintiff that she did not discover the purported usurpation until a later time is
questionable at best. But for purposes of the application of the statute of limitations, it is irrelevant.
16
usurpation accrued at some later time. New York courts are clear that a claim for usurpation of
corporate opportunity does not continually accrue any time diversions of profits or some other
act purportedly belonging to the parent company occurs but, rather, is measured solely from the
initial diversion to the newly formed corporation. See, e.g., Welwart v. Dataware Elecs. Corp.,
277 A.D.2d 372, 373 (2d Dep't 2000) ("the limitations period is measured from the date of the
initial alleged breach in 1981 when the defendants allegedly deprived the plaintiff of his right to
the shares and began diverting profits, regardless of when the damages began to accrue"); see
also Turner, 268 A.D. at 244 ("[A]ny cause of action against [the alleged usurper] accrued not
later than April, 1918" when the stock allotted was delivered). Because the time period for
bringing a claim derivatively on behalf of Euphrates for usurpation of a corporate opportunity
expired at least a year before Plaintiff filed this lawsuit, any attempt by Plaintiff to premise her
ownership of stock in Chobani on a usurpation claim must fail as a matter of law.
D.
Equity precludes Plaintiff from now claiming to be a shareholder.
Even if Plaintiff were able to substantiate her claim that she is a shareholder of
Chobani—which she is not—equity would preclude this Court from recognizing her as a
shareholder. Indeed, despite Plaintiff's claim in this litigation that she has understood herself to
be a shareholder of Euphrates since 1997 and of Chobani since 2007, she has told a directly
contradictory story to (at least)
The doctrines of estoppel and unclean hands each foreclose Plaintiff s attempt to change
her story now. See, e.g., Amarant v. D 'Antonio, 197 A.D.2d 432, 434 (1st Dep't 1993) (unclean
hands may bar injunctive relief concerning enforcement of a shareholders' agreement). The
doctrine of estoppel provides that, if Plaintiff failed to disclose an ownership interest in
Euphrates or Chobani that she now claims to have in a prior proceeding, then Plaintiff is
17
estopped from taking a different position in this proceeding.
Envt'l Concern v. Larchwood
Constr., 101 A.D.2d 591, 594 (2d Dep't 1984) (estoppel barred plaintiff from taking position
inconsistent with prior proceedings). For example, in Goldman v. Rio, the court dismissed the
plaintiff s claims for the value of his purported equity in a dissolved partnership, as well as
dividends from the partnership because, in his bankruptcy proceeding, he previously "listed no
assets from which dividends could be paid to creditors." 853 N.Y.S.2d 837, 839 (Sup. Ct.
Nassau Co. 2008), aff'd on other grounds 62 A.D.3d (2d Dept. 2009).
Here, Plaintiff has made numerous representations over the years—some under penalty of
perjury—that directly contradict the story that she now tells this Court.
All of these statements are independently sufficient to preclude, as a matter of equity, the claims
asserted by Plaintiff in this lawsuit and, for the purposes of this motion, demonstrate that
Plaintiff cannot establish by clear and convincing evidence a likelihood that she will prevail on
her claims against Defendants.
Separately, the doctrine of unclean hands also precludes the Court from crediting
Plaintiff s story that she had "her" shares issued in Mr. Ulukaya's name. Levy v. Braverman, 24
A.D.2d 430, 430 (1st Dep't 1965) (denying equitable relief where plaintiff had stock issued in
18
defendant's name so as to hinder claims of plaintiff's creditors); Amarant v. D'Antonio, 197
A.D.2d 432, 434 (1st Dep't 1993) (unclean hands may bar injunctive relief concerning
enforcement of a shareholders' agreement). 12 Here, the numerous default judgments entered
against Plaintiff's "Ayse Giray" identity illustrate that any attempt to have her shares issued in
another's name would only have been a scheme to defraud her many creditors.
While Plaintiff made clear in a March 31 letter to the Court that her moving papers would
be replete with salacious and sensational details about supposed bad acts perpetrated by Mr.
Ulukaya (none of which are even remotely accurate), these allegations have no relevance to
Defendants' ability to invoke the equitable defenses described here, nor are they relevant for any
other purpose. In fact, the allegations are completely baseless, or simply rank hearsay, espoused
by a disgruntled former employee whose irrelevant testimony Plaintiff has gratuitously procured
for the purpose of distracting from the insufficiency of her own claims. Plaintiff s conduct
makes clear that her actual objective in filing this motion is try her case in the press.
(See, e.g.,
Exhibit 17, March 30, 2013 E-mail ("Hamdi's bad acts as testified to by witnesses and as
evidenced in documents involving his representations to the USDA, NYS Department of
Taxation and Finance, banks, lenders, his acts towards a competitor, consumers, employees and
prior investors will be presented."); see also Exhibit 18, March 31, 2013 Letter to Court.) While
Defendants would be glad to respond to all of Plaintiff's baseless claims, none of those claims
have anything to do with Plaintiff's injunction request.
12
Whether Plaintiff's inequitable conduct harmed any of Defendants is not a prerequisite to Defendants invoking
an unclean hands defense. "It has been explicitly held that where a plaintiff transfers property to a defendant . . .
in order to defeat the interests of a third party, such as possible claims of creditors, a showing that the defendant
was actually injured by plaintiffs conduct is not required" for an unclean hands defense. Festinger v. Edrich, 8
Misc.3d 700, 705 (Sup. Ct. Kings County 2005) (emphasis added), gild 32 A.D.3d 412, 414 (2d Dep't 2006)
(action to impose constructive trust upon real property barred where plaintiff's entrustment of property to sister
was intended to place assets out of reach of creditors).
19
E.
Plaintiff's claim is barred by a judgment of divorce.
Plaintiff s claim to Euphrates ownership also fails because it is barred by her judgment of
divorce with Mr. Ulukaya. It is well settled in New York that the court in a divorce action shall
determine the respective rights of the parties in their separate or marital property. New York
Domestic Relations Law §236[B] (5) (a) provides:
Except where the parties have provided in an agreement for the disposition of
their property, pursuant to subdivision three of this part, the court, in an action
wherein all or part of the relief granted is divorce . . . shall determine the
respective property rights of the parties in their separate or marital property,
and shall provide for the disposition thereof in the final judgment.
The New York Court of Appeals has recognized that a final judgment of divorce settles the
parties' rights pertaining not only to those issues that were actually litigated but also as to those
issues that could have been litigated.
Chen v. Fischer, 6 N.Y.3d 94 (2005); O'Connell v.
Corcorani l N.Y.3d 179 (2003). In Boronow v. Boronow, 71 N.Y.2d 284 (1988), the Court of
Appeals dismissed the wife's post-divorce action against her former husband in which she
sought a declaratory judgment that she was entitled to one-half of all property, real and personal,
including the former marital residence and held "ancillary issues like title to marital property are
certainly intertwined and constitute issues which generally can be fairly and efficiently resolved
with the core issue. The courts and the parties should ordinarily be able to plan for the resolution
of all issues relating to the marriage relationship in a single action."
The complaint for divorce and accompanying affidavit stated that
Thus, to the extent Giray's
claims that her alleged 33% interest in Euphrates constitutes her separate property, and not her
share of marital property, such claim nonetheless could have and should have been raised and
20
determined in the 1999 divorce action. The law required Plaintiff to have raised the issue of her
alleged one-third interest in Euphrates in the 1999 divorce action, and makes clear that she is
barred from maintaining these claims in the current action. Mr. Ulukaya had the right to rely on
the judgment as a final determination as any property, separate or marital.
II. PLAINTIFF WILL NOT SUFFER IRREPARABLE INJURY IF INJUNCTIVE
RELIEF IS DENIED
Even though imminent, irreparable harm is a the sine qua non of injunctive relief,
Plaintiff s motion fails to present a cogent theory of any harm at all—let alone irreparable
harm—absent the relief she is seeking in this motion. Plaintiff s threadbare effort falls far short
of the standard required for injunctive relief.
Idlewild 94-100 Clark, LLC v. City of N
Y, 898
N.Y.S.2d 808, 823 (Sup. Ct. N.Y. County 2010) (denying preliminary injunction where plaintiffs
failed to demonstrate any "immediate and irreparable harm' . . . that would stem from a denial
of their request for a preliminary injunction").
First, and most importantly, Plaintiff has failed to show that the transaction she seeks to
enjoin would change the percentage of equity Plaintiff claims to own in Chobani. Plaintiff
contends that she owns, at most, 53% of Chobani; she does not question that at least 47% of the
company belongs to Mr. Ulukaya. The press articles upon which Plaintiff relies in bringing his
motion report that the proposed transaction contemplates a sale of a 15% equity stake. Thus,
even if the Court takes as true Plaintiff s contention that she owns "either 33% or 53%" of
Chobani, a sale of 15% equity would not change her purported ownership interest. Under these
circumstances, Plaintiff could not possibly establish any harm to her (let alone irreparable harm)
if the transaction being contemplated is consummated because the amount of equity that would
be sold is far less than the 47% that Mr. Ulukaya indisputably owns.
Tacitly conceding this fact, Plaintiff resorts to misdirection. She claims that even the sale
21
of a minority interest—that she cannot show changes her purported shares—will somehow affect
her unfairly. This assertion is completely baseless. In addition to asking the Court to presume
that Plaintiff is a shareholder, she is now seeking relief of a type that would have necessitated
that she have been a party to some sort of shareholder agreement with Mr. Ulukaya—for
example, a prohibition on Mr. Ulukaya selling any of his own equity stake. Obviously, no such
agreement exists, and Plaintiff s implication that there is some sort of obligation is belied by her
own testimony,
Second, Plaintiff has failed to meet her burden of showing that whatever harm she might
theorize is not compensable by money damages. New York courts have routinely recognized
that ". . . an injury compensable in money is not irreparable." Mohamed v. Persaud, 35 Misc. 3d
1219(A) (Sup. Ct. Queens Co. 2012). Here, Plaintiff s own verified amended complaint states
that she is seeking money damages, presumably because she believes that her purported equity
interest is something that can be valued. As such, Plaintiff cannot establish, by clear and
convincing evidence, any irreparable injury.
III. THE BALANCE OF EQUITIES FAVORS DEFENDANTS
Plaintiff, on the other hand, faces no
irreparable harm as discussed above, and, moreover comes to this Court with unclean hands.
The balance of the equities tips decisively in favor of Defendants.
22
First, as set forth above, Plaintiff has not met her burden of showing that her alleged
interest in Euphrates and Chobani is affected by the contemplated transaction. Even though the
Court has not made any determination that she is a shareholder, Plaintiff appears determined to
block a sale of a 15% or less interest as rumored in the press. Setting aside the fact that Plaintiff
has yet to prove her status as a shareholder of Chobani (or Euphrates), Plaintiff fails to explain
how any such transaction would actually halm her, much less how it would cause irreparable
injury necessitating an injunction. Indeed, even if Plaintiff could prove that she owns 53% of
Chobani—which she cannot—the Court should not allow Plaintiff to interfere in a transaction for
a sale of a minority equity interest that she does not even claim to own. These factors weigh in
Defendants' favor. Deane v. City of N Y Dep't of Bldgs.,177
Misc. 2d 687, 699 (Sup. Ct. N.Y.
County 1998) (balance of equities favored defendant which "invested substantial time and
energy" into transaction and stood "to lose a great deal of money" and business opportunity).
Second, as set forth above, Defendants' affirmative defense of unclean hands precludes
Plaintiff's recovery in her underlying suit; but moreover, under settled case law, Plaintiff s
unclean hands also forecloses granting the injunctive relief requested here. Shokin v. Geller, 16
Misc. 3d 1110(A), at *3 (Sup. Ct. N.Y. County 2007) (denying injunction where balance of
equities were against plaintiff with unclean hands); Ferolito v. Vultaggio, 36 Misc.3d 1227(A), at
*3 (Sup. Ct. N.Y. County 2012) ("In balancing the equities, the court should consider various
factors, including...whether plaintiff has unclean hands.").
Third, Plaintiff seeks an extraordinary remedy that is simply unjustified given the facts.
Plaintiff's proposed injunction threatens substantial and irreparable harm to Chobani.
23
Injunctive relief is a "drastic remedy which should be used sparingly."
Fischer, 168 A.D.2d at 601 (2d Dep't 1990). Plaintiff cannot put forth any facts meriting the
extreme relief requested. Taken together, the equities favor Defendants.
Deane,177 Misc. 2d at
699 (denying injunctive relief where equities favored defendant); Scott v. City of Buffalo,
16
Misc. 3d 259, 292 (Sup. Ct. N. Y. Co. 2006), affd, 38 A.D.3d 1287 (4th Dep't 2007) (same).
IV. PLAINTIFF WILL BE UNABLE TO PROVIDE AN APPROPRIATE
UNDERTAKING
Plaintiff is incapable of providing an undertaking sufficient to compensate Defendants for
13
24
the financial harm faced should an injunction be granted, and therefore her motion should be
rejected. A bond must be furnished before a grant of a preliminary injunction.
See C.P.L.R.
6312(b); Gerstner v. Katz, 38 A.D.3d 835, 836 (2d Dep't 2007) (trial court erred in granting
injunction without requiring undertaking from plaintiff); Scotto v. Mei, 219 A.D.2d 181, 182,
184 (1st Dep't 1996) (trial court erred in granting injunction without requiring undertaking
where defendants faced "serious financial consequences"). The undertaking must be sufficient
to "reimburse [Defendants] for damages sustained if it were later determined that the preliminary
injunction was erroneously granted."
Gerstner, 38 A.D.3d at 836. In the context of an
anticipated corporate transaction, parties seeking injunctive relief have been required to post
multi-million dollar bonds in light of the potential damages faced by defendants.
USA Holdings, LLC v. Citigroup Global Mkts. Realty Corp.,
See Destiny
69 A.D.3d 212, 224 (4th Dep't
2009) ($15 million undertaking reasonable where bank was enjoined from terminating loan).
CONCLUSION
For the foregoing reasons, Defendants respectfully request that the Court deny Plaintiff s
motion for injunctive relief.
25
Dated: April 3, 2014
Respectfully submitted,
Yosef J. Rierner, P.C.
David S. Flugman
Robert A. Gretch
601 Lexington Avenue
New York, New York 10022
Telephone: (212) 446-4800
-- and -HARRIS BEACH PLLC
Douglas A. Foss
99 Garnsey Road
Pittsford, New York 14534
Telephone: (585) 419-8800
Attorneys for Defendants Hamdi Ulukaya
and Chobani, Inc.
FOX Rt
HI D LLP
i ..
ick
Scott L.
2000 Mar t Street
20th Floor
Philadelphia, PA
Telephone: (215) 299-2860
FOX ROTHSCHILD LLP
John A. Wait
100 Park Avenue
Suite 1500
New York, NY 10017
Telephone: (212) 878-7900
Attorneys for Defendant Euphrates, Inc.
TO:
ROSENBERG FELDMAN SMITH, LLP
Richard B. Feldman
Michael H. Smith
Stephen J. Sassoon
551 Fifth Avenue, 24th Floor
New York, New York 10176
Telephone: (212) 682-3454
Attorneys for Plaintiff Ayse Giray